In September 1998, Google officially opened for business in a rented garage with a staff of three. From that inauspicious beginning, Google quickly grew into the biggest and most powerful Internet search engine in the world. When they launched AdWords in 2002, Google revolutionized advertising on the Web with the introduction of the a cost-per-click (CPC) pricing model.
While Google has branched off into numerous other Internet technologies ranging from Gmail to maps, their core strength and primary focus has remained search technology and contextual advertising. This focus has led Google to grow from a few guys in a garage to a corporate giant with a $138 billion market cap.
In the hyper-fast-paced world of Internet technology, however, competition can cause giants to fall at the same speed that it produces new millionaires from the next “I’ve got a sweet office in my garage” genius. While Google has clearly established their dominance over contextual advertising they are facing new competition from smaller ad networks like Quigo and Industry Brains among others. At the same time they are trying to extend their dominance into the offline advertising world. As a result, Google finds itself fighting battles on two fronts.
On the Internet side, Google is facing increasing competition from smaller ‘transparent’ ad networks. In a transparent network, advertisers can place ads on specific publisher Websites and publishers have the ability to control who is advertising on their Website. The key is the flexibility and control given to the publisher and to the advertiser.
At issue is the fact that a growing number of publishers want unfiltered control over who advertises on their Website. High profile sites will strong traffic volume are beginning to command this and companies like Quigo are there to serve them. While Google is beginning to offer limited transparency they will have a hard time providing the necessary tools and flexibility because this isn’t a case of technology — this is a case of culture.
Giving up control is not a phrase that you will find anywhere in Google’s mission statement. However, with the emergence of transparent ad networks that is exactly the kind of strategic decision that Google finds itself wrestling with.
Over the past year, a number of articles have been written about smaller ad networks that have begun to challenge Google’s dominance. The NY Times, USA Today and Business Week, just to name a few, have all published stories related to the growing competition for contextual ad market that generated $2 billion in 2006.
While Google is ready and waiting to take on anyone who challenges them on their home turf of Internet advertising, they are simultaneously mounting a new offensive trying to force their way into TV, radio and print ad sales, and they’re finding quite a bit of resistance.